Emblem Properties would like to share some information about the market in regard to real estate. Susan Bryant with TMC Home Loans, has shared the following information in light of the coronavirus and the Federal Reserve’s recent lowering of interest rates:
In the last several days we have had multiple calls from our real estate friends, and lots of clients, asking what we think might happen with mortgages, mortgage rates and the real estate industry.
Here is what we are telling people:
On Sunday the Federal Reserve did lower the interest rates from 0% to 0.25%. This rate is the Fed’s overnight lending rate. This is the money the Fed’s lend to banks for overnight, or short-term loans. They did that in hope to help stabilize the economy and to try and help stabilize the stock market. It didn’t work (right now) but if things will calm down a little, I believe we will see mortgage rates drop. The Investors right now are just holding steady while they try to figure out what is going to happen. (Their crystal ball is currently a little fuzzy).
There are 3 main issues driving the mortgage rates:
Corona Virus Panic
Stock Market Panic
Russia and Saudi Arab’s fight over oil control (which has dragged in the United States)
Usually when the Fed’s drop the rate, we do see a decline in our rates. Also, normally when the Stock market goes down, we also see a decline in our rates. The reason that happens is because the mortgage rates are tied to the bond market, not the stock market. So, when people get out of the stock market, they usually go into the bond market and that helps mortgage rates. Right now, people are getting out of the stock market and taking cash. They are not getting into the Bond market at all. That is one of the reasons we are not seeing a decline in mortgage rates.
Mortgage Investors like stability. They don’t like panic. (who does !!)
The Mortgage Investors let us lock loans usually for 30 – 45 days. We lock loans at the beginning of the process because clients want to know what their rate is going to be. That being said, that means the Mortgage Investors are holding that money at the rate we locked in, but we are not going to close for 30 – 45 days. So that lender is taking a risk that the rates will be the same (or close) 30 – 45 days down the road.
For example, if we locked a loan today for a 30-year fixed loan at 2.875%, what happens if, in 30 days, when we do close if rates are at 4%? That lender now holds a loan that is below market value. It isn’t sellable. This isn’t good for any Investor.
Right now, the Mortgage Investors are just calmly waiting for the stress and initial panic to slow. I believe (and pray) the panic will slow a little and we can soon move on to normal business. We are talking to our clients daily. Any new clients we have we are advising them not to lock their loan. We can start the process whether it is a purchase loan or a refi loan and lock the loan later.
I know you are all getting bombarded with questions from your clients, so please feel free to share this information. Although this is a crazy time, it may also be a great time to purchase or refinance. We have all had a great start to 2020 and we are currently in uncharted waters, but together, we will prevail.
At TMC Home Loans we are still here. We will continue to work. We have locked our office doors and are not taking any walk-in business, but we are available by phone, email and fax. We are taking these steps to limit our risk of contamination so we can stay open for you, your buyers and your sellers. Our lenders are equipped to work remote and have done so multiple times in the past (Hurricanes and such). Our work process has not been affected. If, down the road, we need to work from home, we have set those protocols in place and it should not affect the timeline for any loans we have.
-Brought to you by Susan Bryant at TMC Home Loans
Emblem Properties is a local real estate brokerage and we are here to answer questions and help in any way through this tough time. Contact us for more information at 936-439-6630.